China Sun Group High-Tech Co., Ltd. Announces Fourth Quarter and Fiscal Year 2010 Financial Results
DALIAN, China, Sept. 14 /PRNewswire-Asia-FirstCall/ -- China Sun Group High-Tech Co., Ltd. (OTC Bulletin Board: CSGH) ("China Sun Group" or the "Company"), a vertically integrated supplier of raw materials for rechargeable Lithium-ion (Li-ion) batteries in China, today announced results for the fourth quarter and fiscal year ended May 31, 2010.
Fourth Quarter 2010 Highlights:
-- Revenue increased 13.7% over the prior year quarter to $11.0 million
-- Operating margin of 28.5%
-- Net profit margin of 21.1%
-- Earnings per diluted share of $0.04
Fiscal Year 2010 Highlights:
-- Revenue increased 11.2% over the prior fiscal year to $41.2 million
-- Operating margin of 28.0%
-- Net profit margin of 20.9%
-- Earnings per diluted share of $0.16
"I am pleased both with the growth of our legacy products and with the launch of our Lithium Iron Phosphate segment during the past fiscal year. With China Sun's high quality production control and strong R&D team, we will be looking to expand our share of what we believe will a growing market as China develops new clean energy businesses and provides government and municipal support. In addition, the first phase of our development of a Power-li battery business, beginning in October 2010, will be an exciting start to our potential entry into a downstream industry where there is opportunity to add customer value and therefore increase margins to the benefit of shareholders," said Mr. Bin Wang, Chief Executive Officer of China Sun Group.
Fiscal Fourth Quarter 2010 Results
Revenue for the fourth fiscal quarter of 2010 was $11.0 million compared to revenue of $9.6 million in the prior year period, an increase of 13.7%. The increase was attributable to higher customer demand and the introduction of a new product, lithium iron phosphate, which was not offered in the prior year period.
Fourth quarter ended May 31, tons sold 2010 2009
Cobaltosic oxide 285 254
Lithium iron phosphate 108 0
Gross profit for the quarter was $3.6 million or 32.7% of revenues compared to $3.4 million or 35.3% of revenues in the same quarter a year ago. The reduction in gross margin was largely due to an increase in the cost of raw materials.
Operating income for the fourth fiscal quarter of 2010 was $3.1 million compared to operating income of $3.1 million in the prior year period, an increase of 0.6%. The increase in operating income resulted from higher gross profit and reduced sales and marketing expenses because of the absence of one-time marketing expenses incurred in the prior year quarter relating to product testing for purposes of certification by our customers, offset by higher general and administrative expenses due to one-off repair and maintenance in the fiscal fourth quarter of 2010.
Net income for the fourth quarter of 2010 was $2.3 million, or $0.04 per diluted share, which was approximately equal to the $2.3 million, or $0.04 per diluted share, in the prior year period.
Fiscal Year 2010 Results
Revenue for fiscal year 2010 was $41.2 million compared to revenue of $37.0 million in the prior fiscal year, an increase of 11.2%. The increase was attributable to higher customer demand and the introduction of a new product, lithium iron phosphate, in October of 2009:
Full Year ended May 31, tons sold 2010 2009
Cobaltosic oxide 1056 718
Lithium iron phosphate 157 0
Gross profit for the year was $13.1 million or 31.7% of revenues compared to $13.6 million or 36.7% of revenues in the same quarter a year ago. The reduction in gross margins was largely due to an increase in the cost of raw materials.
Operating income for fiscal year 2010 was $11.5 million compared to operating income of $11.5 million in the prior year period, an increase of 0.5%. The increase in operating income resulted from the absence of non-recurring sales and marketing expenses incurred in the prior year relating to product testing for purposes of certification by our customers, and lower selling, general and administrative expenses compared to the prior year, offset by lower gross profit in the most recent period.
Net income for fiscal year 2010 was $8.6 million, or $0.16 per diluted share, which was approximately equal to the net income of $8.6 million, or $0.16 per diluted share in the prior year period.
Research and Product Development Plans and Funding Sources
The Company is continuing to develop its Lithium Iron Phosphate business in collaboration with potential customers' R&D and product development facilities. During fiscal year 2010 the company sent LIP samples to 24 potential customers and gave out a further 9 samples in the first quarter of fiscal 2011. The samples usually undergo a six month testing process before being considered as viable input materials for the customer's production process. A number of the potential customers are coming to the end of their testing processes and additional LIP orders may result in fiscal 2011. Additional output would require expansion of the Company's production facilities.
In addition to co-operation and testing with potential customers, the Company is also investing research funds into the development of its own power Li-ion batteries. The Company believes that there is a significant market for a product in this marketplace and plans to continue further research and development. If results are favorable, the Company would begin a significant investment in manufacturing facilities for power Li-ion batteries later in fiscal 2011.
Initial funding for additional LIP production and power Li-ion battery research, development and manufacturing are expected to come from the Company's cash reserves which stood at $18 million as of May 31, 2010. The Company has elected to terminate its previously announced $15 million equity facility after determining that the incremental cost of capital would result in a sub-optimal financing mix. The termination of the agreement did not result in any penalties for the Company, and no shares were issued under the agreement. The Company is actively exploring more suitable financing alternatives.
Fiscal Year 2011 Outlook
For fiscal year 2011, China Sun Group expects to produce 1,200 tons of cobaltosic oxide and lithium cobalt oxide and 600 tons of lithium iron phosphate. The production of Lithium Iron Phosphate will be weighted towards the second half of the 2011 fiscal year. Based on these production levels and the Company's expectations for raw materials prices for the next twelve months, full year revenue is expected to be in the range of $56.0 million and $58.0 million, net income is expected to be in the range of $10.0 million and $ 11.0 million, with net income per diluted share in the range of $0.18 to $0.20.
Appointment of Chief Executive Officer
China Sun announced today that on September 13, 2010, Mr. Guosheng Fu was appointed the Chief Executive Officer of China Sun Group High-Tech Co. As a result of this appointment, and effective upon the commencement of Mr. Fu's appointment, Bin Wang will cease to be Chief Executive Officer. Mr. Wang will continue as the Company's Chairman of the Board of Directors.
Mr. Fu, 54, has been with the Company's wholly-owned subsidiary, Dalian Xinyang High-Tech Development Co. Ltd ("DLXY") since May 2002. From May 2002 until August 2003, Mr Fu was a general manager of DLXY. In April 2003 to December 2007 he was appointed Assistant to the Chairman of the Board. In January 2008, he was appointed Vice President and General Manager of DLXY, in charge of its day-to-day operations. Mr. Fu has acquired extensive management experience over the last three decades and has received awards in management excellence, including Glorious Entrepreneur of Heilongjiang Province and Northeast China as well as Outstanding Figure of Brand Management of China. Mr. Fu also has extensive experience in developing and managing new industries in the energy sector, employing innovative thinking, a pioneering spirit, and a strong concept of market and brand awareness.
About China Sun Group High-Tech Co., Ltd.
China Sun Group High-Tech Co. ("China Sun Group") produces anode materials used in lithium ion batteries. Through its wholly-owned operating subsidiary, Dalian Xinyang High-Tech Development Co. Ltd ("DLX"), the Company primarily produces cobaltosic oxide and lithium cobalt oxide. According to the China Battery Industry Association, DLX has the second largest cobalt series production capacity in the People's Republic of China. Through its research and development division, DLX owns a proprietary series of nanometer technologies that supply state-of-the-art components for advanced lithium ion batteries. Leveraging its state-of-the-art technology, high-quality product line and scalable production capacity, the Company has recently diversified into the manufacture of LIP and plans to forward integrate to manufacture of power Li-ion batteries. For more information, visit http://www.china-sun.cn .
Safe Harbor Statement
The statements contained herein that are not historical facts are considered "forward-looking statements." Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, statements regarding the Company's ability to become a leading anode material supplier for Li-ion batteries used in the new energy automobile industry are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including, but not limited to, the effect of political, economic, and market conditions and geopolitical events; legislative and regulatory changes that affect our business; the availability of funds and working capital; the actions and initiatives of current and potential competitors; investor sentiment; and our reputation. We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by any forward-looking statements. The factors discussed herein are expressed from time to time in our filings with the Securities and Exchange Commission available at http://www.sec.gov .
FINANCIAL TABLES FOLLOW
CHINA SUN GROUP HIGH-TECH CO.
CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 2010 AND 2009
(Currency expressed in United States Dollars ("US$"),
except for number of shares)
As of May 31,
2010 2009
ASSETS
Current assets:
Cash and cash equivalents $ 18,017,266 $ 9,209,953
Accounts receivable, trade 2,793,038 1,580,220
Inventories 1,218,336 1,657,023
Value-added tax receivable -- 124,627
Deposits and prepayments 3,049 439,560
Total current assets 22,031,689 13,011,383
Non-current assets:
Technical know-how, net 2,475,298 2,608,059
Property, plant and equipment, net 20,567,954 19,630,119
TOTAL ASSETS $ 45,074,941 $ 35,249,561
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 2,127,244 $ 847,796
Income tax payable 1,488,619 1,476,030
Other payables and accrued
liabilities 984,189 1,022,303
Total liabilities 4,600,052 3,346,129
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value;
2,000,000 shares authorized; none of
shares issued and outstanding,
respectively -- --
Common stock, $0.001 par value;
100,000,000 shares authorized;
53,422,971 shares and 53,422,971
shares issued and outstanding,
respectively 53,423 53,423
Additional paid-in capital 9,585,204 9,585,204
Accumulated other comprehensive
income 3,043,344 3,067,549
Statutory reserve 2,277,365 1,387,775
Retained earnings 25,515,553 17,809,481
Total stockholders' equity 40,474,889 31,903,432
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 45,074,941 $ 35,249,561
CHINA SUN GROUP HIGH-TECH CO.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED MAY 31, 2010 AND 2009
(Currency expressed in United States Dollars ("US$"),
except for number of shares)
Years ended May 31,
2010 2009
Revenues, net $ 41,189,122 $ 37,033,483
Cost of revenue (inclusive of
depreciation and amortization) 28,134,650 23,444,655
Gross profit 13,054,472 13,588,828
Operating expenses:
Sales and marketing 77,870 574,671
Research and development 121,825 102,069
General and administrative 1,311,598 1,423,013
Total operating expenses 1,511,293 2,099,753
INCOME FROM OPERATIONS 11,543,179 11,489,075
Other income:
Interest income 35,067 35,449
INCOME BEFORE INCOME TAXES 11,578,246 11,524,524
Income tax expense (2,982,584) (2,943,786)
NET INCOME $ 8,595,662 $ 8,580,738
Other comprehensive (loss) income:
- Foreign currency translation
(loss) gain (24,205) 479,361
COMPREHENSIVE INCOME $ 8,564,957 $ 9,060,099
Net income per share - Basic and
diluted $ 0.16 $ 0.16
Weighted average common stock
outstanding - Basic and diluted 53,422,971 53,422,971
CHINA SUN GROUP HIGH-TECH CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2010 AND 2009
(Currency expressed in United States Dollars ("US$"))
Years ended May 31,
2010 2009
Cash flows from operating
activities:
Net income $ 8,595,662 $ 8,580,738
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation of property, plant
and equipment 1,369,824 666,657
Amortization of technical know-how 130,161 --
Changes in operating assets and
liabilities:
Accounts receivable, trade (1,213,221) (252,398)
Inventories 436,714 3,121,272
Value-added tax receivable 391,661 329,511
Deposits and prepayments 435,697 (363,191)
Accounts payable, trade 1,279,095 100,064
Customer deposits -- (343)
Income tax payable 13,980 475,318
Other payables and accrued
liabilities (304,563) 93,496
Net cash provided by operating
activities 11,135,010 12,751,124
Cash flows from investing activities:
Payment on technical know-how -- (2,206,150)
Purchase of plant and equipment (1,300,564) (3,785,437)
Payment on construction in
progress (1,024,906) (1,532,786)
Net cash used in investing
activities (2,325,470) (7,524,373)
Effect of exchange rate changes on
cash and cash equivalents (2,227) 104,088
NET CHANGE IN CASH AND CASH
EQUIVALENTS 8,807,313 5,330,839
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 9,209,953 3,879,114
CASH AND CASH EQUIVALENTS, END OF
YEAR $ 18,017,266 $ 9,209,953
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 2,127,504 $ 2,468,468
Cash paid for interest $ -- $ --
For more information, please contact:
Company Contact:
Mr. Guosheng Fu, Vice President
China Sun Group High-Tech Co., Ltd.
Tel: +86-411-8288-9800/8289-2736 (China)
Email: [email protected]
Web: http://www.china-sun.cn
Investor Relations Contact:
Mr. Mark Collinson, Partner
CCG Investor Relations
Tel: +1-646-833-3422
Email: [email protected]
Web: http://www.ccgirasia.com
SOURCE China Sun Group High-Tech Co., Ltd.
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